Report: AOL’s Tim Armstrong wants Verizon to acquire Yahoo to build an ad powerhouse

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AOL, Inc. Chief Executive Officer Tim Armstrong has grand plans to turn parent company Verizon, Inc. into an ad powerhouse, and acquiring Yahoo, Inc. may be a part of that plan, according to a new report Wednesday.

According to The Wall Street Journal, by 2020 Armstrong wants AOL to grow from its current 700 million users to two billion, generating between $10 billion and $20 billion in revenue, making it a top global media company.

The only way for Armstrong to achieve this plan would be to expand the business, and there’s one way of doing that: acquiring Yahoo.

“Verizon, with its deep pockets and high hopes for digital advertising, is a leading contender in the [Yahoo] auction,” people familiar with the situation told the paper, and the buy would give “Verizon and AOL a stronger competitive edge.”

Yahoo is said to currently hold a share of only 2.4 percent of the U.S. mobile advertising market, versus Google, Inc. and Facebook, Inc. holding a combined 50 percent, but Yahoo is said to offer “tremendous scale” with one billion monthly users across all its properties and 600 million accessing those sites and services via mobile devices.

Yahoo turn around

The biggest problem Yahoo has faced under the leadership of former Google Executive Marissa Meyer is that it has failed to tap into the growth in mobile advertising, with a Bloomberg report in October noting that the company “has failed to hold onto advertising market share in key areas such as mobile, where rivals such as Facebook and Google have gained ground.”

More recent numbers came via a leaked Yahoo internal report obtained by The Information that notes Yahoo’s overall decline may be driven by the fact that it had completely missed the boat on mobile, with only 22 percent of Yahoo’s home page daily users accessing the site via their smartphones, compared to 90 percent for Facebook.

To AOL’s credit they have mostly transitioned successfully from a services portal to a media company, and they have developed, and at times acquired, the skill set and knowledge to turn a company such as Yahoo around.

While Yahoo in many areas competes with AOL, that double up may actually work to AOL’s advantage should they acquire Yahoo as there would be immediate cost savings by eliminating duplication, while at the same time AOL has a wealth of experience running a highly similar business.

Forty firms are said to have signed nondisclosure agreements with Yahoo in the past several weeks to obtain information on the company prior to the April 11 deadline to submit preliminary bids to acquire the business.

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